Julia Pyper is a Senior Editor at Greentech Media covering clean energy policy, the solar industry, grid edge technologies and electric mobility. She previously reported for E&E Publishing, and has covered clean energy and climate change issues across the U.S. and abroad, including in Haiti, Israel and the Maldives. Julia holds degrees from McGill and Columbia Universities. Find her on Twitter @JMPyper.

Time is running out for President Trump to rule on the Section 201 solar trade case.

With a fast-approaching deadline of Jan. 26, trade case stakeholders are making their final attempts to sway the president -- and nervously placing their bets on what’s to come.

When a decision will come remains unclear. Sources told E&E News that Trump’s trade advisers are expected to deliver a solar tariff plan this week. Meanwhile, a White House official told Politico a decision could come as soon as today, but later retracted that comment. "We don't have a specific date," the official then said.

Other sources close to the negotiations told GTM they expect the president to issue his decision on or very near the Jan. 26 statutory deadline, due to the complexity of the issue. But even that date may not fully close the case.

According to trade experts, implementation of a remedy decision could be delayed an additional 90 days if the Trump administration decides to pursue a “negotiated settlement.” The type of action referenced in the Section 201 statute that could trigger further review would involve negotiating “quantitative restrictions” on imports of solar products subject to the 201 investigation.

Theoretically, such discussions could be even broader than the 201 case, and could therefore include negotiations on a settlement that also addresses anti-dumping and countervailing duties on Chinese and Taiwanese PV manufacturers from previous solar trade cases. For many in the solar industry, this would be major win. At the very least, it would give the Trump administration a little more time to grapple with a complex situation.

A comprehensive solution and possible exemptions

The U.S. initially imposed duties on Chinese producers in 2012, having concluded they were flooding the market with subsidized solar cells and modules. New duties were imposed on solar products from China and Taiwan in 2014, after the U.S. discovered a loophole in the earlier case.

Unfortunately, those decisions came with unintended consequences. In response to the duties, China filed a trade action targeting U.S. polysilicon and put in place significant duties on imports from the United States. Because of that retaliatory action, U.S. polysilicon producers have effectively not been able to sell in the Chinese market since 2014.

Last week, hundreds of workers from Michigan-based Hemlock Semiconductor (HSC) urged President Trump to restore the U.S. polysilicon industry’s access to China. HSC representatives delivered a letter to the White House on Jan. 10 that specifically called for Trump to "support their high-quality, high-value jobs by announcing an approach to the U.S.-China solar trade disputes that includes polysilicon and the Section 201 remedy."

The three remaining polysilicon manufacturers in the U.S. have lost a third of their workforce over the past four years, as the U.S. and China have engaged in solar trade disputes. "Unless U.S. polysilicon access to the Chinese market -- which represents 80 percent of global demand for our product -- is restored, the U.S. polysilicon industry will be forced to continue to shut down production and eliminate jobs,” the HSC letter states.

HSC was founded in 1961 and is currently composed of several joint venture companies owned by The Dow Chemical Company, Corning Inc. and Shin-Etsu Handotai. On behalf of the company's 1,500 full-time employees, HSC is seeking “a comprehensive solution that looks at the entire solar U.S. value chain,” Brooke Beebe, vice president of external affairs, told MLive.

In addition to the negotiated settlement, President Trump’s proclamation on the Section 201 case could include an exemption process, according to one trade expert who spoke on background due to the sensitivity of the issue. This process would also last for 90 days.

If the administration goes this route, certain companies and countries could make a case for why they should be immune from tariffs. This would give trade negotiators more time to dig into the details on various solar technologies and the state of play with various trading partners.

Sources told Inside Trade last week that the administration plans to exclude Canada and Mexico from any remedies resulting from Section 201 investigations into imports of solar cells and modules, as well as washing machines, due to safeguard provisions in the North American Free Trade Agreement. Excluding Canada and Mexico could facilitate the next round of NAFTA negotiations set to take place next week -- and could throw a lifeline to U.S.-based SunPower, which has a solar panel manufacturing plant in Mexico. But the Office of the U.S. Trade Representative has so far declined to comment on possible exclusions.

There is no evidence that President Trump will initiate an exemption process for companies, either. But in theory, offering an out to American companies that rely on imported solar products, like Tesla and SunPower, would align with the administration’s jobs agenda.

SunPower CEO Tom Werner has been outspoken about the damage that high tariffs would cause to his company.

“It's crazy that you would pick on the second-largest company in America and a significant employee driver,” he said, in a recent interview. “We have 1,000 direct employees, 12,000 at our dealer network, 4,000 in our suppliers and another 1,000 in the field…and we would be the ones most affected by tariffs."

SunPower competitor First Solar also manufactures solar products abroad, but is exempt from Section 201 tariffs because the case is aimed specifically at crystaline silicon solar PV products, and First Solar makes cadmium telluride thin-film panels. Given that both American companies offer unique solar products, "common sense would tell you if they’re excluded...SunPower [should also be excluded],” said Werner. “But we’ll see if common sense prevails.”

The threat of retaliation

Last October, the U.S. International Trade Commission (U.S. ITC) issued a set of recommended tariffs in the Section 201 petition that was brought by U.S.-based manufacturers Suniva and SolarWorld Americas earlier in the year. Three of the four commissioners recommended implementing tariff-rate quotas on imported solar cells and a blanket tariff on imported modules of up to 35 percent.

All of the proposed remedies were lower than Suniva’s initial request, but are still expected to increase solar costs by 10 to 12 cents per watt. As a result, GTM Research expects installation volumes to fall compared to its base-case solar outlook.

If President Trump approves trade remedies by Jan. 26 that are consistent with recommendations from the ITC, and he does not call for additional negotiations or exemptions, remedies will take effect 15 days later.

At that point there would be no further appeals process, unless U.S. trading partners decide to take up the case the World Trade Organization -- an eventuality the Trump administration seems to be preparing for.

The last Section 201 case in the U.S. pertained to steel products and was decided by President George W. Bush in March 2002. In that case, the European Union and seven other countries quickly moved to impose retaliatory tariffs aimed at politically sensitive areas of the U.S. economy, including exports of Florida oranges and Michigan-made cars.

At the same time, the tariffs were hurting U.S. consumers of steel products, said Paul Nathanson, senior principal at Bracewell LLP, who worked on the steel case in 2002. Some 200,000 American jobs were lost in steel-using industries as a result of the tariffs. The combined effect of retaliatory measures and domestic employment prompted the Bush administration to end the tariffs 18 months after putting them in place.

While Trump came in with a strong protectionist trade agenda, "the reality is he’s hearing from all sides,” said Nathanson, who currently represents parties opposed to the Section 201 case.

“The disruption to the U.S. economy by artificially raising prices is making the administration talk to a lot of people before they decide,” he said. “Every action you take on tariffs opens the threat that someone is going to retaliate against U.S. exports -- and exports are important to this country, just like imports are.”

"The bigger issue is the lack of certainty"

By opening up settlement and exemption negotiations, President Trump could potentially avoid a broader trade war, while shoring up domestic industry.

An ideal settlement arrangement, according to some in the solar industry, would see China drop tariffs on U.S. polysilicon products and the U.S. drop all tariffs on solar cells and modules tariffs from the 201 case, as well as the previous anti-dumping and countervailing duties cases. Stakeholders would then take cash deposits from solar duties collected from China in past years (at a rumored value of $1.5 billion) and use the money to support new U.S. solar manufacturers, as well as Section 201 petitioners, Suniva and SolarWorld Americas, and possibly U.S. polysilicon companies too.

But such a deal would be very tricky to pull off -- particularly on a tight deadline. And in the meantime, the solar industry would have to cope with several more weeks of uncertainty.

“Whatever tariff framework is put in place, manufacturers will figure out how to optimize around it,” said Reagan Farr, CFO of Nashville-based solar developer Silicon Ranch, which Royal Dutch Shell invested in this week. “The bigger issue is the lack of certainty. Once we know that the rules are we will accommodate a structure that will continue to optimize the efficiency inherent to the solar industry.”

Rhone Resch, former president and CEO of the Solar Energy Industries Association, said he’s doubtful any kind of settlement can be reached.

“If we haven’t fixed it in the last five years, it will be tough to fix it in 90 days,” he said.

If the Trump administration really wants to negotiate with China, “You’re likely see a high tariff come out to get the Chinese to the table,” Resch added.

Be prepared for high tariffs

There are no great options for the Trump administration in the Section 201 solar trade case.

The president has clearly stated that he wants to take a hard line on U.S. trade issues and against China in particular. But the solar trade case doesn’t fit conveniently within the anti-China and “America First” box.

On the one hand, it’s the administration’s first opportunity to flex its muscles as part of a broader protectionist trade agenda, and possibly boost one segment of the U.S. solar manufacturing sector. But on the other hand, imposing tariffs puts blue-collar jobs at risk, has bad optics around supporting foreign-backed companies, and enhances the complexity around broader trade and national security discussions.

Trump’s trade team is aware of all this.

"The White House is coordinating an exhaustive process, alongside [the U.S. Trade Representative], that ensures any and all consequences of recommendations sent to the president -- be they economic, national security or otherwise -- are fully considered and researched," an administration official told Politico yesterday.

One industry source told GTM last week that congressional staff working on the case are “increasingly optimistic” that tariffs are going to be as restrictive as originally thought. Another source said they believe module tariffs will come in between 20 and 30 percent -- below the ITC’s highest proposed tariff.

Cells are expected to be under a tariff-rate quota, meaning one tariff level will apply to imports below a certain threshold and another will apply above it. But there’s currently no indication of what those quotas could be.

Resch has long held the view that U.S. solar developers need to plan for the worst. “The industry should be prepared for high tariffs, in excess of the U.S. ITC's recommendations,” he said.

Nathanson of Bracewell LLP cautioned industry participants not to assume anything about the Section 201 outcome. In the 2002 steel case, stakeholders widely believed President Bush would impose 20 percent tariffs, up until the moment he announced tariffs at 30 percent.

"The decision solely rests with the president and could change at any moment,” Nathanson said.

In addition to solar, the president faces decisions on three other industries in the coming weeks. At the same time, the White House is preparing for Trump’s one-year anniversary and the State of the Union address, amid ongoing activity around the Russia investigation. Given the busy calendar, Trump could issue a joint announcement on all trade cases.

To make a statement, Trump may decide to give the announcement next week from the World Economic Forum in Davos, Switzerland -- an event synonymous with economic globalization and free trade.

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